The union government has allowed the nine top public sector undertakings full financial and operational autonomy. They have been granted a free hand in incurring capital expenditure without any monetary ceiling, raising resources and restructuring their organisations.

Six of the nine companies selected are operating in a monopolistic market. Most of the PSUs that have been exposed to market forces have failed miserably. Even the so called blue chips like Bhel have been able to survive largely on government orders. Decontrolling these companies will no doubt make these companies stronger, but the real test will be in an open market situation. Four of the navratnas are oil companies who are in desperate need for funds to run their day-to-day operations. These companies would have preferred better rates for their products more than anything else. As for SAIL, there is little the company could do with the freedom unless it changes its product line, improves its distribution network and operational efficiency. Considering the Rs 279 crore loss that the company has made in the first two months of the current fiscal, SAIL will need more than mere freedom to turnaround.

The performance of NTPC is not linked to the number of units it produces, but is directly linked to the payment capabilities of SEBs. With the SEBs starved of funds, NTPC can gain only in the short run from this `freedom'. IPCL is already affected by a depressed market and will need all the freedom to expand both horizontally and vertically. By the time it pulls its act together, reduction in import duties and further capacity expansion from other players will make life tougher for IPCL.As for VSNL, it can use all the freedom it can get to meet the challenge it is likely to face after 2005, when the sector will be opened up. Lastly, it needs to be remembered that New Zealand experimented with PSU autonomy before realising that private sector conditions cannot be replicated in a public sector environment.,

Newsprint industry

Delicensing couldn't have come at a worse time for the newsprint industry. The entire industry is reeling under the threat of imported newsprint and has been desperately seeks protection-in these circumstances nobody will set up new capacity.Indian newsprint suffers not only on the price front but also on the quality front. Since Canadian newsprint is of far superior quality as well as around the same price, obviously Indian newsprint will not be in demand. Way back in 1989-90, the Kelkar committee had recommended that newsprint be delicensed and duty of 40 per cent be imposed to protect the domestic industry. It was not implemented but it should have been obvious to the industry that tariffs would decline and it was time to be competitive. In 1992-93, the actual user was allowed to import newsprint at zero duty provided the consumption of imported to domestic newsprint ratio did not exceed 1:2. The impact was that the ratio which was 1:4 declined to 1:2, another indication to industry that it was time to pull up its socks. Take the case of TNPL. In the last 11 years to 1996-97, the company had not reduced the price of newsprint, but in 1996-97 it had to cut price thrice to remain competitive. TNPL enjoyed the highest margin in the industry, being a bagasse-based plant. The company posted losses in the second half of 1996-97.

Even today, the demand for newsprint in the country exceeds domestic production and yet the domestic manufacturers are forced to reduce production. The industry is demanding protection for being incompetent. Has it something to do with the fact that the majority of the newsprint manufacturers are in the public sector?

Infosys moves up

An unhindered growth story, sensitiveness to shareholder interest reflected by the high quality of disclosures and a strong product portfolio are the main aspects behind the strong market perception for the Infosys stock. No wonder then that an announcement of a strong first quarter where profits doubled, saw the stock jump Rs 145 to a high of Rs 2149. Net profits for the first quarter ended June 30, 1997 increased from Rs 4.55 crore to Rs 9.22 crore, while total revenues jumped a solid 73 per cent. The first quarter results are merely a continuance of the impressive growth story at Infosys. Sales at Rs 139.22 crore for the year ended March 1997, was up 57 per cent compared to Rs 88.55 crore last year.

The company's focus on the domestic market was outlined by the 69.79 per cent jump in domestic sales on a year-on-year basis, though from a relatively smaller base. Export revenues also increased a solid 56.31 per cent to Rs 125.28 crore. After having realised the pitfalls of equity investment and providing for the erosion of its portfolio in 95-96, it has disclosed in its annual report that it has completely shifted out of all its equity exposure. A strong mix of fixed price projects, offshore software development centres and product offerings have been the drivers of growth for Infosys in the past. But projects such as the Y2K solution for the year 2000 problem and the company's focus on banking automation software are likely to help Infosys continue its growth story.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.